Coming away from a meeting at QUALCOMM, Inc. (NASDAQ:QCOM) headquarters, top analyst Tim Long of BMO notes that senior executives exuded confidence regarding a number of “hot topics,” including: its legal dispute with Apple, a pending NXPI acquisition, and an exciting opportunity to transition to 5G.
Broaching the matter of the ongoing lawsuit with Apple, Long believes “the company is prepared to fight AAPL long-term, though management is clearly willing to settle earlier if offered reasonable terms.” The analyst further emphasizes that “there are a lot of levers that can be used to help negotiate a settlement, including modem and other chip supply, as well as flexibility in the structure of a deal.” If the matter should go to trial, management expects hearings in late 2018 or early 2019.
Though the chip giant’s pending acquisition of NXPI will not be an easy integration, the analyst still views it as “strategically positive” pointing out that “management sees the approval process as proceeding in line with expectations, with Europe, China, and South Korea among the remaining approvals needed and an anticipated close by end-CY17 poise a major challenge.”
On the 5G front, management believes the company will hit its royalty rate target this year due to a quick ramp in 2019 “thanks in part to early participation by China.” In a similar vein, “partly because of faster timing, management expects higher pertinence of 4G IPR.” However, citing “business case limitations and penetration issues,” Long remains skeptical over management’s enthusiasm.
“We make no changes to our estimates […] We believe most of the bad news is in the stock, but lack of visibility around multiple litigations keeps us on the side lines,” concludes the analyst.
As such the analyst reiterates Market Perform rating on QCOM with a price target of $55.00 representing a 5% rise over current trading levels.
Tim Long has a solid TipRanks score with a 66% success rate and a high ranking of #133 out of 4,611 analysts. Long realizes 16.9% in his annual returns. However, when recommending QCOM, the analyst averages a loss of 8.4%.
Tipranks analytics reveal QCOM as a Buy. Out of 16 analysts polled by TipRanks (in the past 3 months), 5 are bullish, while 11 are sidelined on QUALCOMM stock. With a 17% upside potential the stock’s consensus price target stands at $61.42.